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"President Obama has identified himself with Ben Bernanke and his monetary follies. Mitt Romney can put this election away by... bashing the Fed and promising a “return to normalcy” on monetary policy."(Photo credit: Wikipedia)

Item #25 in Mitt Romney’s “59 Policy Proposals That Will Get America Back To Work” is, “Designate China a currency manipulator and impose countervailing duties”. The Romney campaign is currently running ads emphasizing this point. This is unfortunate, and will hurt, rather than help Governor Romney’s effort to defeat President Obama in November. Rather than bashing China, Romney should be criticizing the real “currency manipulator”, which is the U.S. Federal Reserve.

Let’s be blunt. Federal Reserve monetary policy errors caused the housing bubble and precipitated the housing bust. Then, more Fed errors turned what should have been a run-of-the-mill recession into the worst economic downturn since the Great Depression. Since then, the Fed's continued misguided monetary policy has produced the slowest recovery in American history.

Money is the most powerful force in our economy. No matter what else is done or not done, the U.S. economy will not recover until the Fed corrects its mistakes.

While this is bad news for America, it is good news for the Romney campaign. To give Obama the “Mondale in 1984”-scale drubbing that he deserves, Romney must not only differentiate his economic policies from those of Obama, he must differentiate his economic policies from those of George W. Bush. Obama’s entire campaign strategy is based upon tying Romney to “the failed (Bush 43) economic policies that got us into this mess”.

Like Bush 43, Romney is running on a platform of low taxes on the activities that create jobs and growth, and reining in the excesses of federal regulatory agencies. These are, in fact, the correct economic policies, even though the Obama campaign is trying to blame them for the Great Recession.

Romney’s big opportunity to differentiate himself from both Obama and Bush 43 lies in the area of monetary policy. Encouraged by Bush 43’s belief in the virtues of a weak dollar, the Federal Reserve made monetary mistakes in the 2000s that overwhelmed the benefits of low taxes and reasonable regulations and produced the terrible economy that we have endured for the past four years.

The electorate already knows that the Fed is the #1 problem. This is why Ron Paul, who is completely unqualified to be president, attracted so much money and support in the two most recent presidential election cycles. It is also why Rand Paul won the Senate race in Kentucky in 2010 by 11 points, while two similar candidates, Sharon Angle and Christine O’Donnell lost their Senate contests in Nevadaand Delaware. The voters have been trying to communicate, “It’s the Fed, stupid!”

Obama is offering a perfect target for a political attack on the monetary policy front. By reappointing Bernanke and remaining silent thereafter, President Obama bought into Bush 43’s “a weak dollar boosts the economy” superstition, and thereby identified himself with the problem.

The bad news is that Romney has thus far shown no real understanding of the role of the Fed in producing and sustaining the Great Recession. His “59 Policy Proposals That Will Get America Back To Work” do not mention the Federal Reserve or “the dollar”. The good news is that there almost four months left in the campaign, and the economy will only grow worse as we move closer to Obama’s “Taxmageddon”, which is scheduled for January 1, 2013.

So, what should Romney be saying in his speeches and campaign commercials? For the purposes of winning the election, it would be enough for him to drop all mention of China, to promise to demand Bernanke’s resignation on January 21, 2013, and to call for “a return to normalcy” on monetary policy.